(Bloomberg) -- It’s “better to ask for forgiveness than permission” when it comes to complying with the law, the billionaire founder of the Binance cryptocurrency exchange once told his team, according to the US government.

On Tuesday it was time for Changpeng “CZ” Zhao to ask for forgiveness, yet prosecutors weren’t exactly in the mood to grant it. In a court filing before his sentencing hearing, they cited the flippant attitude on display in this and other remarks as one of the reasons they recommended the court give him three years in prison — longer than what guidelines prescribe — following his guilty plea to violating anti-money laundering laws in November. 

Seattle Judge Richard Jones wasn’t convinced he deserved that much time, instead giving him four months in prison. Still, Zhao will enter the history books as the richest person ever to do time in US federal lockup since his ownership of Binance — and an estimated $43 billion personal fortune tied to it — remain intact. His wealth is likely to grow even bigger as Binance’s business accelerates amid crypto’s latest bull run. And despite relinquishing the chief executive title as part of his deal with the government, Zhao’s lingering influence on the company is hard to miss: Its new board of directors is dominated by his devoted friends, and the mother of three of his children plays a major role in running its operations.

Needless to say, the arrangement with the Department of Justice doesn’t sit well with some critics of the cryptocurrency market. 

“The DOJ should have charged dozens of people connected to Binance and should have not only prosecuted them and punished them but barred them from the financial industry forever,” said Dennis Kelleher, president and CEO of the advocacy group Better Markets Inc. “If you’re not going to punish the others, he deserves the most-severe sanction possible.”Read More: Binance Founder Changpeng Zhao Gets Four Months in Prison

Zhao also agreed to pay a $50 million personal fine. Binance itself agreed to $4.3 billion in penalties to settle a case that involved a litany of alarming allegations linked to violations of anti-money laundering and sanctions laws, including assertations from the US Treasury that the exchange failed to prevent and report suspicious trading by Hamas, Al Qaeda and other groups designated by the US as terrorist organizations. US Attorney Tessa M. Gorman and her fellow prosecutors cited the “massive” ramifications from Zhao’s misconduct and what she called “significant harm to US national security” in asking for three years imprisonment. 

Yet despite the gravity of the allegations and the admissions of guilt by Binance and its former leader, the company Zhao built continues to thrive and its status as the most-important crypto exchange has survived it all. The business, which earns fees from customers’ trades, tends to be a money-printing machine during crypto boom times like this one, with Bitcoin reaching record highs last month as investors return in droves to the market following the launch of US exchange-traded funds investing directly in the original cryptocurrency.

While its dominance has slipped a bit, Binance has maintained its market-share leadership in combined spot and derivatives crypto markets. The company said it added more than 40 million new users in 2023, up 30% from the prior year. Customers’ holdings on the exchange have swollen to more than $100 billion. The company likely made $9.8 billion in annualized revenue in the 12 months through March, according to Bloomberg estimates. 

“It’s really the ETFs and whatnot that are helping drive a lot of this activity,” Andy Goldin, global head of data and analytics at Binance, said in an interview in March. “It’s really fueled by more institutional trading activity at this point.”

Binance’s perseverance is in large part because traders view the company and Zhao very differently than they do its onetime bitter rival FTX, which went bankrupt after founder Sam Bankman-Fried illegally misappropriated billions of dollars worth of users’ cryptocurrencies. Following his conviction, Bankman-Fried received a 25-year sentence, and his net worth is currently estimated at $0. Among the crimes that the DOJ charged Binance with, duping customers about the use of their funds wasn’t one of them.

The divergent outcomes for Bankman-Fried and Zhao reflect the pair’s dramatically different styles of doing business. After his crypto empire collapsed, Bankman-Fried embarked on a chaotic effort to talk and tweet his way out of trouble, even a failed attempt to testify in his own defense at his trial. On the other hand, Zhao admitted his guilt, cooperated with the government and kept his mouth shut. Even their trademark hairstyles offer a symbolic view of the contrast: Bankman-Fried was famous for his long, unruly tangle of curls, while Zhao sports a buzz cut that would look at home at a boot camp.

And most importantly, unlike FTX, Binance has been able to handle the impulses of hot-money crypto traders, who tend to yank their funds from exchanges at any hint of trouble, such as the collapse of the Terra UST stablecoin and bankruptcy of Three Arrows Capital hedge fund in 2022, not to mention Binance’s own legal entanglements last year.  

“Binance was the biggest exchange and operated well throughout the failures of FTX, 3AC, Terraform Labs, and more,” said Austin Campbell, an adjunct professor at Columbia Business School and a consultant for blockchain firms. “The US government’s action was seen as a big overhang, and since they will survive it, it gives people confidence in them.”

How much things have actually changed inside Binance since the plea agreement that ousted Zhao is the subject of much watercooler talk in the crypto world.

The most obvious change is that Zhao has relinquished his role as the public face of the company. While he was never the type to rub elbows with celebrities or invite reporters into his home, the way FTX’s Bankman-Fried did at his lavish Bahamas penthouse, Zhao has gotten so low-key since his guilty plea that he’s practically been invisible. Gone are the days when he pitched his exchange in interviews on financial-news television stations, podcasts and panel discussions at conferences, or mixed it up with foes and fans on social media.

Filling much of the void is Yi He, the mother of three of his children and one of the co-founders of Binance.

“People were worried that once CZ was not at the helm, there would be disruptions,” said Annabelle Huang, managing partner of the crypto investment firm Amber Group that trades on Binance. “But it looks like Yi is doing a good job keeping it going."

While Richard Teng, who previously was the head regulator at Abu Dhabi Global Market, is the post-Zhao chief executive and public face of Binance, Zhao’s partner remains an important force in the company. 

On social media, Yi He has signaled that Binance’s efforts to deal with the infamous “Wild West” crypto culture remain a work in progress. She condemned so-called “rat trading,” or buying and selling that is intended to manipulate markets or is corruptly motivated, for example by early notice of a new token listing on the exchange that could move its price.  She offered bounties and threatened to black-list any employees engaging in shady trading:  “If we verify the corruption of Binance team members, we will keep your identity confidential and reward you with a security vulnerability bonus of $10,000 to $5 million,” she posted in her native Mandarin on X in February. “It is much easier and more profitable than rat trading.”

In a nearly two-hour audio “ask me anything” session on X in December, Yi He and Teng split the time talking. She described the division of labor between the two at the company: She focuses on what users need, while Teng serves as the public face interacting with regulators around the globe. “The best place for me is serving the customers,” she said in Mandarin. “Richard is more suited to take on the CEO role.”

And what about Zhao himself?​​​

“CZ was just stepping down, he's not going down to hell,” Yi He said with a chuckle during the discussion on X. In spirit, he’s “still with us, don’t worry about it,” she said, while giving a glimpse at some of what Zhao was up to while awaiting sentencing: Hitting the ski slopes.

As he awaited sentencing, Zhao’s home base had been with his sister in Los Angeles, according to a court document, but he had been allowed to roam the US, where his two older, college-aged kids live. He was banned by the court from leaving the country – even when he asked to visit an unidentified loved one undergoing surgery in Abu Dhabi, where his partner Yi He resides with their three children.

Zhao also has some friendly faces on Binance’s board of directors, including some trusted lieutenants who worked for the company for years while it violated US laws.

Board member Heina Chen, a co-founder of the company, was one of more than 160 people who wrote praise-filled reference letters to the court on Zhao’s behalf in an effort to persuade the court to be lenient with his sentencing. She said that “CZ is the spiritual leader of Binance. There is no doubt that he is also my prudent leader and guide.” Board member Rock He, who has been with Binance since its founding in 2017, gushed that Zhao was like a brother to him: “This bond is what I’m most proud of in my life, a gift from above.” Xin Wang, a former White & Case lawyer who Binance lists as an independent board member, told the court that Zhao helped take care of her when she lost her mother as part of what she called a “tradition of quiet friendship carried on for decades.” A representative for Binance did not respond to requests for comment about whether Zhao continues to discuss the company with current employees and board members. Zhao’s lawyers declined to comment. 

Now it’s time for Zhao’s friends to take care of his creation, a massive company which has thousands of workers scattered around the world but still no physical headquarters. A US monitor — likely a big law firm or consultant — will be assigned to keep an eye on Binance’s compliance with the US plea agreement for five years to make sure it’s taking appropriate steps to abide by anti-money laundering and sanctions laws. Ultimately, the monitor’s reports will answer the question of how much Binance has been able to change its ways.

Yet the legal entanglements don’t end there. The SEC last June filed an action against Binance and its sister company, Binance.US, for allegedly running unregistered exchanges, broker-dealers and clearing houses, among other accusations. Many believe that case will drag on for years as Binance fights the accusations. Meanwhile in Nigeria, a Binance executive has been in prison since late February for tax evasion and fraud; he pled not guilty.

Many traders using Binance haven’t seen much change at the exchange — and for many, that’s been a good thing. They say they are still talking with the same mid-level to entry-level staffers, and their trading experience hasn’t changed.

“No difference to us,” says investor Alistair Milne. “If anything, there’s more certainty now due to the settlement, so that’s good news.”

Some are more cautious, especially in the post-FTX environment. 

“I am not losing sleep that Binance is going to go away, but I need to make sure I don’t have all my risk on it,” says Tim Grant, CEO of Deus X Capital, which has more than $1 billion under management.

Zhao may even see some friendly faces among his fellow inmates, according to Sam Mangel, a prison consultant who served time himself.

“He won’t be extorted, he won’t be threatened,” Mangel predicted. “Very successful people at low-security prison tend to be looked up to.”

As for his next act after his sentence is over, Zhao told the court in a February letter that he has been speaking with biotech startups about ambitious plans to use blockchain technologies “with the aim of curing diseases once and for all, as well as providing medical access to billions in the world.” Another insight into Zhao’s thinking these days comes via a concept paper for something called Giggle Academy, his plan for a global online primary-school program.

“I could try to help fight corruption, world hunger, climate change, etc.,” reads the concept paper. “But I have no expertise there.” 

--With assistance from Ava Benny-Morrison.

(Updates throughout with Zhao receiving sentence.)

©2024 Bloomberg L.P.